WEBINAR: CREDIT DECISIONING AGILITY & GOVERNANCE Please note that this session was held at a particular point in time (Wednesday June 4 th , 2020, 4pm-5pm EDT), and in light of the rapidly evolving Covid-19 situation, it is possible these discussions are no longer accurate after that date June 4 th , 2020 A COVID-19 Crisis Management Imperative
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WEBINAR: CREDIT DECISIONING AGILITY & GOVERNANCE · WEBINAR: CREDIT DECISIONING AGILITY & GOVERNANCE Please note that this session was held at a particular point in time (Wednesday
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WEBINAR: CREDIT DECISIONING AGILITY & GOVERNANCEPlease note that this session was held at a particular point in time (Wednesday June 4th, 2020, 4pm-5pm EDT), and in light of the rapidly evolving Covid-19 situation, it is possible these discussions are no longer accurate after that date
June 4th, 2020
A COVID-19 Crisis Management Imperative
CONFIDENTIALITYOur clients’ industries are extremely competitive, and the maintenance of confidentiality with respect to our clients’ plans and data is critical. Oliver Wyman rigorously applies internal confidentiality practices to protect the confidentiality of all client information.
Similarly, our industry is very competitive. We view our approaches and insights as proprietary and therefore look to our clients to protect our interests in our proposals, presentations, methodologies, and analytical techniques. Under no circumstances should this material be shared with any third party without the prior written consent of Oliver Wyman.
THE FORBEARANCE “TIME OUT” HAS PROVIDED A SHORT-LIVED RELIEF TO DEFINE NEW STRATEGIES, BUT THE CONSEQUENCES OF FAILURE TO ACT MAY BE SEVEREForbearance programs have provided an opportunity to design and implement a credit risk management program –failure to be proactive could have serious consequences down the road
Lasting legal and regulatory complications
• The last recession left a long tail of regulatory and legal troubles for banks
• A lack of process rigor and controls could leave the industry in a difficult situation
Loss of customers and reputation
• Material groups of customers are being impacted – more than ~4.2 million homeowners are in forbearance plans
• Mishandling customer interactions and messaging could irreparably harm customer loyalty and brand, particularly as other banks look to take valuable customers as the crisis is resolved
• The crisis presents both an opportunity and hazard as banks navigate challenges of serving their customers and the broader public
Extreme financial impact
• In last recession, US unemployment peaked at ~10% – this crisis is already significantly worse, with unemployment at ~15%
• If not well managed, the severity of losses could have severe and lasting impacts on bank financial health and share price
LENDERS NEED NEW DATA SOURCES AND ATTRIBUTES TO MANAGE CREDIT IN THIS CRISIS
New / expanded customer-level data sources or attributes
Income • Deposit account data on current customers– To estimate or verify income– To indicate potential income instability
• Expanded third-party employment verification for new originations
Expenses • Transaction data on current customers• Credit bureau data on required payments for off-us debts
Secondary sources of repayment
• Balances in savings and/or investment accounts• Home equity
Debt • Expanded use of bureau information on ‘off-us’ debts– Total debt, bankcard debt (traditional, but underused)– New indicators for forbearance/deferment
Behavior • Forbearance (including off-us) may affect logic but not determine outcomes– For customers not in forbearance, scores remain strong indicators– For those in forbearance, consider further diligence on actual payments
Pandemic Navigator provides insights on recent trends, near term outlook and downside scenarios
Weekly change in new cases – as of 6/1/2020
CREDIT RISK STRATEGIES SHOULD CONSIDER CONDITIONS AT A LOCAL LEVELIn this crisis the economy is being driven strongly by the pandemic, which is evolving quite differently across the states
Credit strategies should directly account for local conditions and vulnerabilities
• Pandemic outlook directly affects economic outlook, and in turn credit outlook for customers in marginal financial situations, e.g.:– Strained affordability– Unstable income– High leverage– Unemployment with temporary benefits
• Local vulnerability attributes can be used to enhance credit strategies at a state or county level– Short-term outbreak severity outlook– Vulnerability to further lockdowns (medium term)
• Sophisticated epidemiological model
• Scenarios accounting for causal relationships, e.g., mobility and testing
• Updated daily to reflect experience at local level
OVERVIEW OF CORRIDOR PLATFORMS CAPABILITIES AND DEMO
03Manish GuptaFounder and CEO of Corridor Platforms
• Systematic tracking of performance to prevent slippage • System alerts and triggers to manage by exception
Ease of IntegrationConnect to small or big data using
flexible connectors Deploy standalone artifacts into Banks
production systems seamlessly
Mission StatementCorridor Platforms is a leading decision workflow governance and automation capability designed by industry veterans to rapidly
transform risk and marketing decisioning at banks, enabling them to leverage new data, AI and automation to create competitive excellence in revenue growth, risk control and operating efficiency in the age of digitization
INTEGRATED DECISIONING PLATFORM: AN EVER-LASTING TRANSFORMATIONA well-designed decisioning platform provides the benefits of cutting-edge analytics with the adaptability and speed of leading digital platforms
Traditional siloed approach New-world approach with full integration
01 Static data files are provided to modeling teams 03 Static data files are provided
to modeling teams
02 Development provides static testing results to validation 04
Technology team and data team implement final model in production environment
01 Data team populates platform with data 03 Model validation team check
model in platform
02 Model development team builds model 04 Platform sends model to
FOR FURTHER DETAILS, CHECK OUT OUR RECENT POV AND LET US PROVIDEYOU WITH A MORE IN-DEPTH, TAILORED DEMO
POV summary
Oliver Wyman and Corridor Platforms have collaborated to explore how a well-designed decisioning platform can enable your organization to answer three key questions to overcome the challenges inherent in adopting new data, technology, and machine learning into core business processes that are heavily regulated in order to achieve the benefits of digitalization and advanced analytics:
– How can we quickly update and advance our production models in a well governed and transparent manner — to keep pace with COVID-19 impacts and the evolution of the market?
– How can we integrate our decisioning models and policies to allow for rapid and efficient updating in the face of evolving conditions?
– Should I invest in rapidly building up capabilities to execute complex machine learning models and provide real-time decisions and optimized account-level pricing?
We would be happy to provide you with a more in-depth demo tailored to your needs
READ OUR LATEST INSIGHTS ABOUT COVID-19 AND ITS GLOBAL IMPACT ONLINE
Oliver Wyman and our parent company Marsh & McLennan (MMC) have been monitoring the latest events and are putting forth our perspectives to support our clients and the industries they serve around the world. Our dedicated COVID-19 digital destination will be updated daily as the situation evolves
QUALIFICATIONS, ASSUMPTIONS, AND LIMITING CONDITIONSThis report is for the exclusive use of the Oliver Wyman client named herein. This report is not intended for general circulation or publication, nor is it to be reproduced, quoted, or distributed for any purpose without the prior written permission of Oliver Wyman. There are no third-party beneficiaries with respect to this report, and Oliver Wyman does not accept any liability to any third party.
Information furnished by others, upon which all or portions of this report are based, is believed to be reliable but has not been independently verified, unless otherwise expressly indicated. Public information and industry and statistical data are from sources we deem to be reliable; however, we make no representation as to the accuracy or completeness of such information. The findings contained in this report may contain predictions based on current data and historical trends. Any such predictions are subject to inherent risks and uncertainties. Oliver Wyman accepts no responsibility for actual results or future events.
The opinions expressed in this report are valid only for the purpose stated herein and as of the date of this report. No obligation is assumed to revise this report to reflect changes, events, or conditions, which occur subsequent to the date hereof.
All decisions in connection with the implementation or use of advice or recommendations contained in this report are the sole responsibility of the client. This report does not represent investment advice nor does it provide an opinion regarding the fairness of any transaction to any and all parties. In addition, this report does not represent legal, medical, accounting, safety, or other specialized advice. For any such advice, Oliver Wyman recommends seeking and obtaining advice from a qualified professional.